The Morning Call
11/8/21
The
Market
Technical
If a picture is
worth a thousand words, then I don’t need to say anything. The upward seasonal bias seems in place. Sit back and enjoy it.
https://www.zerohedge.com/the-market-ear/clnaqfmlee
The late cycle melt
up has started.
More commentary.
https://www.zerohedge.com/the-market-ear/paradigm
But longer term.
https://www.zerohedge.com/markets/did-fed-just-set-stock-market-crash
As you may remember,
TLT’s performance in the prior week was marked by a sharp increase in price accompanied by a
decline in short term bond prices (yield curve flattening) as investors
appeared to be starting to discount slower economic growth/recession. However, last week, that upward bias in long bond
prices came to a halt as the economic stats showed significant improvement---clearly
calling into question the slow growth/recession scenario. But then on Friday, long bond prices spike
again. Although the short end of curve
also rose (prices up), meaning the yield curve steepened.
While the economic
implications of this pin action may be a bit confusing, I think the simplest
explanation is that all investors are getting jiggy and buying everything with
both hands. As I said above enjoy it but
be careful. I wouldn’t be chasing
anything here.
GLD made a third major reversal in as many weeks. Last
Monday, I observed (about the prior two week’s pin action) that ‘It appears
that GLD had finally found some life after four months in a downtrend. On Friday it finished (1) above its 100 DMA
[now resistance];….., (2) above its 200 DMA [now resistance];…., and (3) above
the aforementioned downtrend. If it remains there through the close today,
it will negate that trend.’ Then ‘Gold’s
pin action last week totally negated everything I said, i.e., it (1) voided the
challenge of both DMA’s, leaving them as resistance, (2) failed its challenge
of the downtrend off its June 2021 high and (3) broke to the downside out of a
pennant formation, suggesting further declines ahead.’
So, if it appears that the bond guys are a bit confused,
it seems that gold investors don’t have a f**king clue. Or as I suggested above ‘investors are
getting jiggy and buying everything with both hands’. One more reason for caution.
The dollar’s pin
action of late has been similar to stocks---it just keeps going up. This, of course, is in line with the aforementioned
‘investors/jiggy/buying everything’ scenario.
However, it may also be reflecting investor conviction that whatever the
economy/Fed/ Biden does, the US will still be a better place to invest than
anywhere else on the planet.
Friday in the
charts.
https://www.zerohedge.com/markets/fed-taper-sparks-best-week-bonds-stocks-gold-over-6-months
Fundamental
Headlines
The
Economy
Review of Last Week
The US data
releases were quite positive, as were the primary indicators (one negative, two positive)---for the second
week in a row. It is too soon to call it
a trend, especially given the erratic nature of the data flow of late. For the moment, my outlook remains unaltered---struggling
growth now and into the future.
Overseas, the
numbers were equally upbeat---likely providing support for the US’s stellar
performance.
Three items bearing
comment:
(1) The FOMC held its November
meeting. As expected, it began the
tapering process [that’s good]. However,
some uncertainty regarding inflation being ‘transitory’ has crept into its
narrative which, if it persists, could move forward the pace of tapering and,
God forbid, a rise in interest rates.
As you know, I don’t think that a stronger economic
[as an explanation for higher inflation] is in the cards; so, I see a low probability
of that prospect being a cause for a more hawkish Fed. On the other hand, inflation brought on by excess
liquidity remains a possibility. And if
that occurs, the Fed will really be in a ‘no win’ dilemma---low growth, rising
inflation. For which it has no one to
blame but itself.
Or maybe tapering is meaningless.
(2)
the house passed the infrastructure bill. It still
must pass the senate, but I don’t believe that is an issue. I have already opined that while I hate
spending more money [going into deeper debt], infrastructure spending tends to
have a payback in the form of enhanced productivity. So, I am not going to howl at the moon over
this measure. It does have the added
benefit of stymieing a slip into recession.
So, I rate this as a net positive for the economy.
(3) Pfizer announced
that it had developed a highly effective treatment for the coronavirus and is
applying for emergency approval.
Hopefully, this will put an end to government mandates and interference in
our lives, which would be a big economic as well as psychological plus.
More good news.
https://www.zerohedge.com/markets/regeneron-shares-surge-antibody-cocktail-cuts-covid-risk-816
Bottom line: growth
isn’t going to pick up because the economy is burdened with increasingly irresponsible
monetary and fiscal policies; and continuing liquidity infusions will only aid
inflationary forces.
US
International
The September Japanese
leading economic indicators were reported
at 99.7 versus 101.3 in August.
The October
Chinese trade balance was +$84.5 billion versus expectations of +$65.5 billion.
Other
Credit card debt soars.
The
Fed
Bank of England does Alfred Hitchcock.
https://www.zerohedge.com/markets/traders-verdict-bank-england-wont-paint-pretty-picture
More.
The decline in the
employment participation rate suggests no need to raise rates.
https://www.zerohedge.com/markets/heres-why-fed-could-stay-easy-looooong-time
Inflation
Food prices hit decade high.
https://www.zerohedge.com/commodities/global-food-prices-hit-fresh-decade-high-october
Including milk.
OPEC+ sticks to
its production plans (i.e., no increase above those already planned).
https://www.cnbc.com/2021/11/04/opec-agrees-to-stick-to-oil-production-plan-defying-us-pressure.html
The inflation tax is enormous.
https://thehill.com/opinion/finance/580043-the-inflation-tax-is-not-only-real-its-massive
Yellen admits the cost of ‘net zero’ carbon
emissions is $150 trillion.
https://www.zerohedge.com/markets/janet-yellen-reveals-net-zero-grand-reset-price-tag-150-trillion
Bottom line
Valuation update.
BofA
on how to trade the bursting bubble.
https://www.zerohedge.com/markets/how-one-bank-will-trade-bursting-biggest-ever-asset-bubble-2022
News on Stocks in Our Portfolios
What
I am reading today
Quote of the day.
Visit Investing for Survival’s
website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
Service.
Friday in the
charts.
https://www.zerohedge.com/markets/fed-taper-sparks-best-week-bonds-stocks-gold-over-6-months
Fundamental
Headlines
The
Economy
Review of Last Week
The US data
releases were quite positive, as were the primary indicators (one negative, two positive)---for the second
week in a row. It is too soon to call it
a trend, especially given the erratic nature of the data flow of late. For the moment, my outlook remains unaltered---struggling
growth now and into the future.
Overseas, the
numbers were equally upbeat---likely providing support for the US’s stellar
performance.
Three items bearing
comment:
(1) The FOMC held its November
meeting. As expected, it began the
tapering process [that’s good]. However,
some uncertainty regarding inflation being ‘transitory’ has crept into its
narrative which, if it persists, could move forward the pace of tapering and,
God forbid, a rise in interest rates.
As you know, I don’t think that a stronger economic
[as an explanation for higher inflation] is in the cards; so, I see a low probability
of that prospect being a cause for a more hawkish Fed. On the other hand, inflation brought on by excess
liquidity remains a possibility. And if
that occurs, the Fed will really be in a ‘no win’ dilemma---low growth, rising
inflation. For which it has no one to
blame but itself.
Or maybe tapering is meaningless.
(2)
the house passed the infrastructure bill. It still
must pass the senate, but I don’t believe that is an issue. I have already opined that while I hate
spending more money [going into deeper debt], infrastructure spending tends to
have a payback in the form of enhanced productivity. So, I am not going to howl at the moon over
this measure. It does have the added
benefit of stymieing a slip into recession.
So, I rate this as a net positive for the economy.
(3) Pfizer announced
that it had developed a highly effective treatment for the coronavirus and is
applying for emergency approval.
Hopefully, this will put an end to government mandates and interference in
our lives, which would be a big economic as well as psychological plus.
More good news.
https://www.zerohedge.com/markets/regeneron-shares-surge-antibody-cocktail-cuts-covid-risk-816
Bottom line: growth
isn’t going to pick up because the economy is burdened with increasingly irresponsible
monetary and fiscal policies; and continuing liquidity infusions will only aid
inflationary forces.
US
International
The September Japanese
leading economic indicators were reported
at 99.7 versus 101.3 in August.
The October
Chinese trade balance was +$84.5 billion versus expectations of +$65.5 billion.
Other
Credit card debt soars.
The
Fed
Bank of England does Alfred Hitchcock.
https://www.zerohedge.com/markets/traders-verdict-bank-england-wont-paint-pretty-picture
More.
The decline in the
employment participation rate suggests no need to raise rates.
https://www.zerohedge.com/markets/heres-why-fed-could-stay-easy-looooong-time
Inflation
Food prices hit decade high.
https://www.zerohedge.com/commodities/global-food-prices-hit-fresh-decade-high-october
Including milk.
OPEC+ sticks to
its production plans (i.e., no increase above those already planned).
https://www.cnbc.com/2021/11/04/opec-agrees-to-stick-to-oil-production-plan-defying-us-pressure.html
The inflation tax is enormous.
https://thehill.com/opinion/finance/580043-the-inflation-tax-is-not-only-real-its-massive
Yellen admits the cost of ‘net zero’ carbon
emissions is $150 trillion.
https://www.zerohedge.com/markets/janet-yellen-reveals-net-zero-grand-reset-price-tag-150-trillion
Bottom line
Valuation update.
BofA
on how to trade the bursting bubble.
https://www.zerohedge.com/markets/how-one-bank-will-trade-bursting-biggest-ever-asset-bubble-2022
News on Stocks in Our Portfolios
What
I am reading today
Quote of the day.
Visit Investing for Survival’s
website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
Service.
No comments:
Post a Comment